State leaders have temporarily restricted some of Winthrop University’s spending authority after a financial audit revealed several concerns, including a contract with a private foundation to manage a student apartment building.

The issues include Winthrop spending $4.5 million on an administrative computing system without soliciting competitive bids and the university’s on-going management of an apartment complex constructed 10 years ago by a related foundation, according to the audit, which covered 2007 to 2010.

The audit also cited an instance of employee fraud that surfaced in 2010 after a staff member stole more than $200,000. Winthrop investigated, the employee was prosecuted, and the school implemented stronger theft prevention measures. The employee is in prison.

Winthrop had checks and balances in place to reveal “any newly hatched fraud schemes,” said Rebecca Masters, university spokeswoman.

“Winthrop’s key concern is that the foundation housing construction and management agreement originated a decade ago, not in the audit period,” Masters said. “So we’re left to wonder why they are issues now.”

Winthrop is now researching its appeal options, she said.

The university is unhappy particularly, Masters said, with the “reach-back and criticism” in the audit related to The Courtyard, a student apartment complex built by the Winthrop University Real Estate Foundation in 2002.

The foundation, a non-profit group established in 1999, built the apartments on land donated by Springs Industries, Inc.

Construction of the complex cost $18.9 million, the audit report states.

Under its agreement with the foundation, Winthrop – a state-supported school – manages the townhouse-style apartment building that houses students only.

State officials who prepared the most recent audit say that Winthrop did not follow S.C.’s procurement code, which dictates how all public institutions spend money and award contracts to vendors.

Winthrop’s agreement to manage The Courtyard and the school’s role in the construction and design of the building, the audit states, effectively amounted to “acquisition” of the complex.

“Acquisitions of major capital projects, however creatively they may be structured,” must follow the state’s procurement code and provide for competitive bids, the audit states.

Winthrop did not knowingly or intentionally fail to follow the state code, according to the audit report, but “effectively acquired the beneficial use” of the Courtyard to meet its students’ needs.

Audit findings

Among the audits findings are that Winthrop:

• “Acquired” the Courtyard because of its management agreement and participation in the design and construction phases, which makes it subject to the state procurement code.

• Used the Courtyard to replace, in part, existing student housing facilities and transferred students to the apartments from university-owned housing

• Agreed to treat the Courtyard “as its own” and to not build competing facilities until the Courtyard’s construction debt is paid

• Collects rent and safety deposit money from students and returns part of the money to the foundation.

• Pays for the Courtyard’s operation and maintenance from rent dollars